Case Study: An Unsecured Business Line of Credit

Finding the right business finance solution can feel tricky for any business owner. With the options for small business finance having different requirements, small business owners may not feel confident in applying for credit facilities, thinking they have to offer up property as security for every credit facility. That’s not the case; we can help find unsecured finance for many businesses in Australia.

The below case study briefly highlights how one of our clients accessed an unsecured business line of credit without offering up property as security.

A property maintenance service business looking to access funds

One of our clients is a property maintenance service business that typically makes repairs and improvements to a residential property at the request of the managing real estate agent. Due to the fluctuations in their cash flow, they were seeking a finance solution to help ease their cash flow management.

Knowing that they didn’t have a property to offer as security, our client initially sought out an invoice financing facility. Unfortunately, invoice finance wasn’t a good fit for their needs, as their debtors weren’t real estate businesses but the investment property owners themselves. Invoice finance unlocks money tied up within outstanding invoices from one Australian business to another. Due to the investment property owners being the ones to foot the bill for maintenance works, this was ruled out as one of our client’s available credit options.

How could our client access an unsecured business loan?

Without a residential or commercial property to offer as loan security, our client didn’t believe they could obtain even a small business line of credit. Thankfully, unsecured business funding is available, including an unsecured line of credit. Australian lenders have come a long way in recent years, with many now offering unsecured lines of credit and business overdraft facilities.

We approached the lender that was the best fit for our property services client, and within 24 hours of application, they were approved for a $50,000 line of credit!

How does a line of credit work?

Business lines of credit give companies, and small businesses access to a pool of funds up to a credit limit. Unlike an unsecured business loan, where you’re paid the funds in a lump sum, a revolving line of credit allows you to withdraw funds as needed. This means you only pay interest on the balance you’ve used, not the entire limit!

A secured line of credit uses a form of security (generally property or other business assets) to provide the lender with a level of protection in the event you can’t repay the line of credit. Therefore, an unsecured line of credit is similar to unsecured business loans, where there is no security offered to the credit provider.

What interest rates might apply for unsecured lines of credit?

Interest rates are a hot topic, so it’s natural to wonder what your interest rate on a line of credit may be. Unlike secured loans, an unsecured loan (including an unsecured business loan) presents a slightly higher risk to the lender, which may mean a slightly higher interest rate.

The best way to find out is to get a quote, using ‘unsecured business loan’ as the product type.

Remember: similar to a business credit card, you only pay interest on the balance you’ve drawn.

Are unsecured business loans a good idea?

Business loans can be a terrific way to achieve business growth, cover expenses, or even fund a startup business. Whether they’re a good idea for your business depends on your circumstances. If you require a credit loan or finance but don’t have the security to offer a lender, then an unsecured loan could be a good idea for your business.

Who offers the best business line of credit?

At darkhorsefinancial.com.au, we offer a comprehensive range of loans and finance solutions to help drive your business to success. We have access to an expansive range of non-bank lenders, meaning that even with bad credit history, we can help source the right lender for you.

Not only are we backed by an Australian Credit Licence, but our client-for-life approach means that we become more than a commercial finance solutions provider — we strive to build strong relationships with our clients, such as the property maintenance client in the above case study, to become a trusted financial partner for life. 

Reach out to us today to uncover a world of possibilities for your small business, including unsecured business funding!